tictac

I understand the principle of construction loans in that you only pay interest on the amount of loan which has been 'drawn down' or paid to the builder.

What I'm trying to do is to forecast how much would need to be paid out in interest *in each month* of the construction period based on the different 'phases' of the build

Let's say, for example, that the house build/home loan is $200k and the interest on this amount is $2000 per month

A work colleague has suggested that a typical build consists of 5 phases:

PHASE 1 = Slab (30%/30%)
PHASE 2 = Frame & Roof (30%/60%)
PHASE 3 = Lock-up (20%/80%))
PHASE 4 = Handover (10%/90%)
PHASE 5 = Sign-Off (10%/100%)

The percentages in brackets represent the percentage (and cumulative percentage) of loan which would be drawn by the builder and therefore the amount of interest payable on/attributable to the percentage of work complete.

In other words, during the build phases, the following interest payments would be due:

PHASE 1 = $2000 x 30% = 600 pm
PHASE 2 = $2000 x 60% = 1200 pm
PHASE 3 = $2000 x 80% = 1600 pm
PHASE 4 = $2000 x 90% = 1800 pm
PHASE 5 = $2000 x 100% = 2000 pm

Are these percentages (of work complete) accurate?

How long (typically) would each phase last?

My work colleague also reckons that the exact percentages (based on the different phases of build/draw down) will be stipulated in the building contract, which will allow you to produce your own, accurate cash flow forecast.

Finally, I've also been told that certain lenders will allow you to defer the actual payment of interest until the house is complete and you move in, in order to provide financial assistance where you may be paying rent in addition to home loan payments. They will, of course, add this interest on to the loan!

So, can somebody please clarify my understanding of the situation?

I'm also interested to read people's views on any potential impact on people who choose to build when there's all this talk of house price stagnation/collapses due to the interest rate hikes we've been experiencing. Lots has been said on the slow down of the (established) housing market but I've read or heard little about how the builders are likely to be affected.

Hope I've not bored anyone

Thanks

Pootle

Hi,

Our stage payments were: deposit - 5%, base - 10%, frame - 15%, lock-up - 35%, fixing - 25% and completion - 10%. There's different schedules but legally they're not allowed to charge more for the earlier stages unless there is good reason. Ours tried to get us to pay 20% base and 20% frame and we refused!

There is a home loan calculator on real estate.com http://www.echoice.com.au/mortgage/h...ymentsbe1.html

You can put in interest only on how much each stage will be to work out your payments. We paid interest only until completion, then it was principle plus interest. This site may be of interest to you - http://forum.homeone.com.au/ all about building!
Good luck ....

tictac

Thanks for the info

How long roughly did each stage take to complete?

Pootle

Roughly ....

site start 31st May, base done end June, frame done end July, lock up done mid Sept., fixing done end Oct, completion mid Dec. Can't remember exactly but it gives you a rough idea. Depends on what you're building as to how long it will take. Ours took 6 1/2 months for a single storey.